Unit 6: External influences on business activity Flashcards
Define balance of payments
The difference between the value of imports and exports of a country over a year.
Define inflation
The price increase of goods and services over time.
Define level of employment
The proportion of the population that are capable of working but are unable to find a job.
Define gross domestic product
The value of all goods and services produced by a country over a year.
Explain the 4 different business cycles
1) Growth - where the economy recovers/grows.
2) Boom - the peak of the business cycle, where business investments and profits are at their highest and most sectors in economy are performing their best.
3- Recession - Where the economy shrinks in size, less investment, decline in economic activity.
4- Slump - when the recession stage of the economy is at its worst.
Define interest rate
The cost to a person or business when borrowing money from a lender/bank.
Define tax
a charge/fee paid to government on income, goods and services.
Define direct tax
The tax charged on personal income or tax on the profit made by a business.
Define indirect tax
The tax charged on the price of goods and services, which is added to the price of goods and services before they are bought.
Define disposable income
The amount of income left for consumers after all tax has been paid.
Negative impacts of tourism industry on the envirnment
- Increased pollution through littering, noise and air pollution.
- Construction of buildings lead to soil erosion and loss of habitat for animals.
Positive impacts of tourism on the environment
- Additional work for local construction businesses.
- Spreads awareness and helps in the conservation of wildlife and natural resources.
Types of waste produced by business activities
- IT waste
- Paper waste
- Commercial waste
- Packaging waste
- Chemical and hazardous waste
Define eternality
The effect of business activities on unrelated parties.
Define social cost
The negative impact of a business decision on society.
Define social benefit
The positive impact of a business decision on society.
Define cost-benefit analysis
Analysis of the costs and benefits of a project, the focus being on the social costs and benefits.
- The social benefits must outweigh the costs, and the interest of the various stakeholders must be taken into account.
Define sustainable development
A business activity is said to be sustainable if it has an overall impact on the environment and its stakeholders, ensuring its survival in the future.
Environmental indicators of sustainable development
- Conservation of natural resources.
- Conservation of forests and habitats.
- Use of renewable energy (solar and wind power).
- Reduction of greenhouse gas emissions.
Social indicators of sustainable development
- High life expectancy by generating less pollution.
- Fair compensation to employees.
- Ethical business decisions by conducting a social cost benefit analysis.
Economic indicators of sustainable development
- Low unemployment by providing work to people.
- High literacy rates by setting up training and knowledge sharing programmes for employees.
- Growing GDP by generating products and services.
Methods pressure groups use to make their points
- Demonstrations
- Boycotting
- Petitioning
- Increasing awareness of the issue
How do businesses respond to environmental pressures
- Reducing their use of energy.
- Following sustainable business practices.
- Using green manufacturing methods.
- Taking legal action against pressure groups.
Advantages and disadvantages of ethical behavior
Advantages:
- Improved image and reputation, which helps in attracting new investors and allow business to grow.
- Can be a motivating factor for existing staff.
Disadvantages:
- High costs when choosing raw materials ethically.
- Costs increasing by improving working conditions and pay for employees, and not using cheap child labour. All this leads to lower profits.
Define multi-national company
An organisation that has operations in more than one country.
Define globalisation
The process of which countries are connected with each other because of the trade of goods and services.
What are the characteristics of globalisation
- Global recognition of brands.
- Growth in international trade.
- Dependency on global economy.
- Greater movement of products, services, people and money.
Define trade bloc
A group of countries that trade with each other and are all part of a free trade agreement.
Define home country
The domestic country where a multinational company first starts its operations.
Define host country
The foreign country where a multinational company sets up its operations.
Opportunities of globalisation
- Businesses can access more markets, which leads to increased sales.
- Labour may be cheaper in host nations and so businesses gain from lower costs.
Threats of globalisation
- Local businesses in the host country may suffer as foreign companies start to sell their products at a cheaper price.
- Exchange rate fluctuations may cause lower profits.
Define tariffs
A tax applied to imported and exported goods.
Define quota
A physical limit to the quantity of goods that can be imported and exported.
Benefits of a business becoming multinational
- Easier access to raw materials.
- Lower cost of labour.
- Economies of scale.
- Access to bigger markets.
- Lower production costs.
Threats of a business becoming multinational
- Shortage of labour.
- Lack of information about the local market.
- Language barrier.
- Expensive labour costs.
- Little brand awareness.
- Currency fluctuations.
Benefits of a multinational to host country
- Provides employment opportunities.
- Knowledge-sharing.
- Increases the choice and quality of goods and services.
- Improves the country’s reputation.
Drawbacks of a multinational to host country
- Undue influence of on the government.
- Increased competition.
- Exploitation of natural resources.
- Less sense of social responsibility.
Define exchange rate
The rate of which one country’s currency can be exchanged for that of another.
Define depreciation
A currency is said to depreciate if the value of currency goes down with respect to another.
Impacts of exchange rate depreciation on businesses
Impacts on importers:
- Imports more expensive.
- Business who rely on imports have to pay more.
Impact on exporters:
- Exports are cheaper overseas; increases the demand for them.
- Businesses which export will benefit from increases sales.
Impacts of exchange rate depreciation on country
- More demand for currency so value of currency rises.
- More exports lead to an increase in balance of payments.
Define appreciation
A currency is said to appreciate if the value of the currency increases with respect to another currency.
Impacts of exchange rate appreciation on businesses
Impacts on imports:
- Imports are cheaper.
- Business who sell imported materials would benefit from reduced costs.
Impact on exporters:
- Exports more expensive overseas.
- Business who export suffer from reduced sales.
